World News – AU – The hidden costs of airlines selling direct

Two airlines that penalize bookings through non-direct channels are seeing the fruits of their labor, but other parts of the industry might end up paying the price.

The Lufthansa Group and Singapore Airlines made important announcements this week regarding New Distribution Capability – the technology standard developed to enable airlines to sell rich content and additional services directly to customers.

From January 2021, Lufthansa will bring its light fares and continuous prices into the online booking tool Neo from American Express Global Business Travel without additional booking fees via NDC. Previously, business travelers would have paid a surcharge of USD 21 per ticket when booking through a global distribution system. The agreement also includes Austrian Airlines, Lufthansa, Swiss and Brussels Airlines.

In the meantime, Singapore Airlines has expanded its collaboration with Amadeus and will make its NDC offerings available through the Amadeus Travel Platform starting next year. Bookers will avoid a $ 12 fine for bookings made through global distribution systems made from Jan.. January 2021. Like Lufthansa, the airline is also planning to introduce dynamic tariffs.

The developments are likely to be welcomed by business travel managers. Not only does this mean that booking fees are avoided, but that travel agents can cancel, cancel, refund and change these bookings without having to contact the airline directly. The tariffs include additional services such as seat selection, excess baggage, special discounts and personalized merchandising offers.

“This exciting announcement is another leap for Amadeus on our NDC journey. Driving NDC and realizing next generation retail capabilities for our customers is an integral part of our long-term global strategy, ”said Javier Laforgue, executive vice president of airline sales and procurement for Amadeus.

It may be part of Amadeus’ strategy, but it is really something the airlines have been aggressively pushing this year.

Together with British Airways and Air France-KLM, they have increased ticket prices that are processed through the distributors, which include Saber and Travelport.

Last month Reed added & Mackay to British Airways’ NDC content, and the airline has now surpassed the International Air Transport Association’s goal of 20 percent NDC bookings by 2020. In September, Air France-KLM signed an NDC contract with Amadeus.

Experts predicted back in April that the lack of flight would mean more time to test these new types of connections, which would breathe new life into the new distributive capacity.

« The airlines’ strategy is starting to pay off and it seems we will see a lot more of these announcements in 2021 as more airlines release differentiated content and consider introducing surcharges or incentives through their NDC channels, » he said Steve Domin, founder and CEO of aggregator Duffel.

“At the beginning of the year, there were major fears that the momentum around NDC would stall. It’s just the opposite. This is exciting for everyone – buyers, airlines, travel agents, aggregators – as it accelerates the transition to a richer, more modern world of distribution. ”

As the major airlines encourage this industry shift, they are paving the way for smaller airlines to sell tickets direct. Every opportunity to increase sales with lower distribution costs will be used after the 2020 pandemic wiped out most of the revenues. Will smaller travel agencies keep up?

« How about all those midsize corporate travel agencies and OTAs that don’t have the technical skills to interpret and build the connection from every carrier, » said Alice Ferrari, CEO of retail platform Kyte.

“Big players like Amex GBT and Reed & Mackay have the resources to do these integrations. The question, however, is how many can build and maintain them at the rate you want. More and more airlines are building and promoting their NDC channels. Direct connections require maintenance, management and updating. multiply that by 10, 20, or 50 airlines. ”

In the meantime, there are questions about what’s going on behind the headlines. Travel agents and global distribution systems rarely disclose commercial terms. Under the Air France-KLM contract with Amadeus, travel agencies using the new content will be charged a surcharge of “a few euros” per ticket.

« You will not see a single announcement from a GDS mentioning the commercials as this is what they are trying to cover up as much as possible, » said Jorge Diaz, CEO and founder of AirGateway. “They always hide the fact that these agreements don’t include the traditional $ 6 to $ 8 per segment paid to them by the airline, which is 70 percent of their generous revenue over the past 30 years. ”

He predicts every flag bearer except those in the U.. . S.. . will have a GDS surcharge through mid-2021, meaning more global distribution systems will be charging travel agents for their service in order to bring the new airline content to their screens.

“This completes the de-monopoly of the aviation distribution industry. Technically, this means the death of a 30-year-old trading model that made GDS the richest men in the industry, and also a different trading landscape for the age of direct selling, where the airlines incentivized directly to the agencies rather than the GDSs or aggregators like us, ”he added.

« I don’t think this is the end of the war, just another step in the airlines’ offensive against GDS. ”

Lufthansa, Saber Global Distribution System, Travel Agency, Swiss International Air Lines, Saber Corporation, Sales, Brussels Airlines